Exhibit 10.75
SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Go Online Networks
Corporation, a Delaware corporation (the "Company") hereby agrees to issue and
to sell to the Subscriber, Secured 8% Convertible Notes (the "Notes")
convertible in accordance with the terms thereof into shares of the Company's
$.001 par value common stock (the "Company Shares") for the aggregate
consideration as set forth on the signature page hereof ("Purchase Price"). The
form of Convertible Note is annexed hereto as Exhibit A. (The Company Shares
included in the Securities (as hereinafter defined) are sometimes referred to
herein as the "Shares" or "Common Stock"). (The Notes, the Company Shares,
Common Stock Purchase Warrants ("Warrants") issuable to the recipients
identified on Schedule B hereto, and the Common Stock issuable upon exercise of
the Warrants are collectively referred to herein as, the "Securities"). Upon
acceptance of this Agreement by the Subscriber, the Company shall issue and
deliver to the Subscriber the Note against payment, by federal funds wire
transfer of the Purchase Price.
The following terms and conditions shall apply to this subscription.
1. Subscriber's Representations and Warranties. The Subscriber hereby
represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been furnished with the
Company's Form 10-KSB for the year ended December 31, 2000 as filed with
the Securities and Exchange Commission (the "Commission") together with all
subsequently filed forms 10-QSB and other publicly available filings made
with the Commission (hereinafter referred to as the "Reports"). In
addition, the Subscriber has received from the Company such other
information concerning its operations, financial condition and other
matters as the Subscriber has requested in writing, and considered all
factors the Subscriber deems material in deciding on the advisability of
investing in the Securities (such information in writing is collectively,
the "Other Written Information").
(b) Information on Subscriber. The Subscriber is an "accredited
investor", as such term is defined in Regulation D promulgated by the
Commission under the Securities Act of 1933, as amended (the "1933 Act"),
is experienced in investments and business matters, has made investments of
a speculative nature and has purchased securities of United States
publicly-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and
other business matters as to enable the Subscriber to utilize the
information made available by the Company to evaluate the merits and risks
of and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Subscriber has the
authority and is duly and legally qualified to purchase and own the
Securities. The Subscriber is able to bear the risk of such investment for
an indefinite period and to afford a complete loss thereof. The information
set forth on the signature page hereto regarding the Subscriber is
accurate.
(c) Purchase of Note. On the Closing Date, the Subscriber will
purchase the Note for its own account and not with a view to any
distribution thereof.
(d) Compliance with Securities Act. The Subscriber understands and
agrees that the Securities have not been registered under the 1933 Act, by
reason of their issuance in a transaction that does not require
registration under the 1933 Act (based in part on the accuracy of the
representations and warranties of Subscriber contained herein), and that
such Securities must be held unless a subsequent disposition is registered
under the 1933 Act or is exempt from such registration.
(e) Company Shares Legend. The Company Shares, and the shares of
Common Stock issuable upon the exercise of the Warrants, shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO GO ONLINE
NETWORKS CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED."
(f) Warrants Legend. The Warrants shall bear the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE
COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO GO ONLINE NETWORKS CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
(g) Note Legend. The Note shall bear the following legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON
SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO GO ONLINE NETWORKS CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
(h) Communication of Offer. The offer to sell the Securities was
directly communicated to the Subscriber. At no time was the Subscriber
presented with or solicited by any leaflet, newspaper or magazine article,
radio or television advertisement, or any other form of general advertising
or solicited or invited to attend a promotional meeting otherwise than in
connection and concurrently with such communicated offer.
(i) Correctness of Representations. The Subscriber represents that the
foregoing representations and warranties are true and correct as of the
date hereof and, unless the Subscriber otherwise notifies the Company prior
to the Closing Date (as hereinafter defined), shall be true and correct as
of the Closing Date. The foregoing representations and warranties shall
survive the Closing Date.
2. Company Representations and Warranties. The Company represents and
warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the respective jurisdictions of their incorporation and have the
requisite corporate power to own their properties and to carry on their
business as now being conducted. The Company and each of its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or prospects or condition
(financial or otherwise) of the Company.
(b) Outstanding Stock. All issued and outstanding shares of capital
stock of the Company and each of its subsidiaries has been duly authorized
and validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement has been duly
authorized, executed and delivered by the Company and is a valid and
binding agreement enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity; and the Company has
full corporate power and authority necessary to enter into this Agreement
and to perform its obligations hereunder and all other agreements entered
into by the Company relating hereto.
(d) Additional Issuances. There are no outstanding agreements or
preemptive or similar rights affecting the Company's common stock or equity
and no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of any shares of common stock or equity of
the Company or other equity interest in any of the subsidiaries of the
Company, except as described in the Reports or Other Written Information.
(e) Consents. No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over
the Company, or any of its affiliates, the NASD, NASDAQ or the Company's
Shareholders is required for execution of this Agreement, and all other
agreements entered into by the Company relating thereto, including, without
limitation issuance and sale of the Securities, and the performance of the
Company's obligations hereunder.
(f) No Violation or Conflict. Assuming the representations and
warranties of the Subscriber in Paragraph 1 are true and correct and the
Subscriber complies with its obligations under this Agreement, neither the
issuance and sale of the Securities nor the performance of its obligations
under this Agreement and all other agreements entered into by the Company
relating thereto by the Company will:
(i) violate, conflict with, result in a breach of, or constitute
a default (or an event which with the giving of notice or the lapse of
time or both would be reasonably likely to constitute a default) under
(A) the certificate of incorporation, charter or bylaws of the Company
or any of its affiliates, (B) to the Company's knowledge, any decree,
judgment, order, law, treaty, rule, regulation or determination
applicable to the Company or any of its affiliates of any court,
governmental agency or body, or arbitrator having jurisdiction over
the Company or any of its affiliates or over the properties or assets
of the Company or any of its affiliates, (C) the terms of any bond,
debenture, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease,
mortgage, deed of trust or other instrument to which the Company or
any of its affiliates is a party, by which the Company or any of its
affiliates is bound, or to which any of the properties of the Company
or any of its affiliates is subject, or (D) the terms of any "lock-up"
or similar provision of any underwriting or similar agreement to which
the Company, or any of its affiliates is a party; or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company,
or any of its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests,
liens, claims or other encumbrances, subject to restrictions upon
transfer under the 1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized and on
the date of issuance and on the Closing Date, as hereinafter defined,
and the date the Note is converted, and the Warrants are exercised,
the Securities will be duly and validly issued, fully paid and
nonassessable (and if registered pursuant to the 1933 Act, and resold
pursuant to an effective registration statement will be free trading
and unrestricted, provided that the Subscriber complies with the
Prospectus delivery requirements);
(iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of
the Company; and
(iv) will not subject the holders thereof to personal liability
by reason of being such holders.
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over
the Company, or any of its affiliates that would affect the execution by
the Company or the performance by the Company of its obligations under this
Agreement, and all other agreements entered into by the Company relating
hereto. Except as disclosed in the Reports or Other Written Information,
there is no pending or, to the best knowledge of the Company, threatened
action, suit, proceeding or investigation before any court, governmental
agency or body, or arbitrator having jurisdiction over the Company, or any
of its affiliates.
(i) Reporting Company. The Company is a publicly-held company subject
to reporting obligations pursuant to Sections 15(d) and 13 of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and has a
class of common shares registered pursuant to Section 12(g) of the 1934
Act. The Company's common stock is trading on the NASD OTC Bulletin Board
("Bulletin Board"). Pursuant to the provisions of the 1934 Act, the Company
has filed all reports and other materials required to be filed thereunder
with the Securities and Exchange Commission during the preceding twelve
months except as set forth in the Reports.
(j) No Market Manipulation. The Company has not taken, and will not
take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation
of the price of the common stock of the Company to facilitate the sale or
resale of the Securities or affect the price at which the Securities may be
issued.
(k) Information Concerning Company. The Reports and Other Written
Information contain all material information relating to the Company and
its operations and financial condition as of their respective dates which
information is required to be disclosed therein. Since the date of the
financial statements included in the Reports, and except as modified in the
Other Written Information, there has been no material adverse change in the
Company's business, financial condition or affairs not disclosed in the
Reports. The Reports and Other Written Information do not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading.
(l) Dilution. The number of Shares issuable upon conversion of the
Note may increase substantially in certain circumstances, including, but
not necessarily limited to, the circumstance wherein the trading price of
the Common Stock declines prior to conversion of the Note. The Company's
executive officers and directors have studied and fully understand the
nature of the Securities being sold hereby and recognize that they have a
potential dilutive effect. The board of directors of the Company has
concluded, in its good faith business judgment, that such issuance is in
the best interests of the Company. The Company specifically acknowledges
that its obligation to issue the Shares upon conversion of the Note and
exercise of the Warrants is binding upon the Company and enforceable,
except as otherwise described in this Subscription Agreement or the Note,
regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
(m) Stop Transfer. The Securities are restricted securities as of the
date of this Agreement. The Company will not issue any stop transfer order
or other order impeding the sale and delivery of the Securities, except as
may be required by federal securities laws.
(n) Defaults. Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or ByLaws. Neither the
Company nor any of its subsidiaries is (i) in default under or in violation
of any other material agreement or instrument to which it is a party or by
which it or any of its properties are bound or affected, which default or
violation would have a material adverse effect on the Company, (ii) in
default with respect to any order of any court, arbitrator or governmental
body or subject to or party to any order of any court or governmental
authority arising out of any action, suit or proceeding under any statute
or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) to its knowledge in violation of
any statute, rule or regulation of any governmental authority which
violation would have a material adverse effect on the Company.
(o) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers
to buy any security under circumstances that would cause the offering of
the Securities pursuant to this Agreement to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the
rules and regulations of the Bulletin Board, as applicable, nor will the
Company or any of its affiliates or subsidiaries take any action or steps
that would cause the offering of the Securities to be integrated with other
offerings.
(p) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Act) in connection with the
offer or sale of the Securities.
(q) Listing. The Company's Common Stock is listed for trading on the
Bulletin Board and satisfies all requirements for the continuation of such
listing. The Company has not received any notice that its common stock will
be delisted from the Bulletin Board or that the Common Stock does not meet
all requirements for the continuation of such listing.
(r) No Undisclosed Liabilities. The Company has no liabilities or
obligations which are material, individually or in the aggregate, which are
not disclosed in the Reports and Other Written Information, other than
those incurred in the ordinary course of the Company's businesses since
December 31, 2000 and which, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the Company's
financial condition.
(s) No Undisclosed Events or Circumstances. Since December 31, 2000,
no event or circumstance has occurred or exists with respect to the Company
or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but
which has not been so publicly announced or disclosed in the Reports.
(t) Capitalization. As of the date hereof and the Closing Date, the
authorized capital stock of the Company consists of 100,000,000 shares of
Common Stock ($.001 par value), of which ___________ shares of Common Stock
were issued and outstanding as of the Closing Date. The Company's Board of
Directors is currently authorized to issue 100,000,000 shares of Series A
Convertible Preferred Stock (no par value). The Board of Directors has
authorized the issuance of ___________ shares of Series A Convertible
Preferred Stock. As of the Closing Date, there will be _________ shares of
Series A Convertible Preferred Stock issued and outstanding. The Company's
Board of Directors is currently authorized to issue 2,000 shares of Series
B Convertible Preferred Stock ($100 par value). The Board of Directors has
authorized the issuance of ______ shares of Series B Convertible Preferred
Stock. As of the Closing Date, there will be _______ shares of Series B
Convertible Preferred Stock issued and outstanding. Except as set forth in
the Reports, there are no options, warrants, or rights to subscribe to,
securities, rights or obligations convertible into or exchangeable for or
giving any right to subscribe for any shares of capital stock of the
Company. All of the outstanding shares of Common Stock of the Company have
been duly and validly authorized and issued and are fully paid and
nonassessable.
(u) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the
date hereof in all material respects, will be true and correct as of the
Closing Date, and, unless the Company otherwise notifies the Subscriber
prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date. The foregoing representations and
warranties shall survive the Closing Date.
3. Regulation D Offering. This Offering is being made pursuant to the
exemption from the registration provisions of the Securities Act of 1933, as
amended, afforded by Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion acceptable to Subscriber from
the Company's legal counsel opining on the availability of the Regulation D
exemption as it relates to the offer and issuance of the Securities. A form of
the legal opinion is annexed hereto as Exhibit C. The Company will provide, at
the Company's expense, such other legal opinions in the future as are reasonably
necessary for the conversion of the Note and exercise of the Warrants.
4. Reissuance of Securities. The Company agrees to reissue certificates
representing the Securities without the legends set forth in Sections 1(e) and
1(f) above at such time as (a) the holder thereof is permitted to and disposes
of such Securities pursuant to Rule 144(d) and/or Rule 144(k) under the 1933 Act
in the opinion of counsel reasonably satisfactory to the Company, or (b) upon
resale subject to an effective registration statement after the Securities are
registered under the 0000 Xxx. The Company agrees to cooperate with the
Subscriber in connection with all resales pursuant to Rule 144(d) and Rule
144(k) and provide legal opinions necessary to allow such resales provided the
Company and its counsel receive all reasonably requested written representations
from the Subscriber and selling broker, if any. If the Company fails to remove
any legend as required by this Section 4 (a "Legend Removal Failure"), then
beginning on the tenth (10th) day following the date that the Subscriber has
requested the removal of the legend and delivered all items reasonably required
to be delivered by the Subscriber, the Company continues to fail to remove such
legend, the Company shall pay to each Subscriber or assignee holding shares
subject to a Legend Removal Failure an amount equal to one percent (1%) of the
Purchase Price of the shares subject to a Legend Removal Failure per day that
such failure continues. If during any twelve (12) month period, the Company
fails to remove any legend as required by this Section 4 for an aggregate of
thirty (30) days, each Subscriber or assignee holding Securities subject to a
Legend Removal Failure may, at its option, require the Company to purchase all
or any portion of the Securities subject to a Legend Removal Failure held by
such Subscriber or assignee at a price per share equal to 120% of the applicable
Purchase Price.
5. Redemption. The Company may not redeem the Securities without the
consent of the holder of the Securities except as otherwise described herein.
6. Fees/Warrants.
(a) The Company shall pay to counsel to the Subscriber its fees of
$8,000 for services rendered to Subscribers in connection with this
Agreement and the other Subscription Agreements for aggregate subscription
amounts of up to $400,000 (the "Initial Offering"). The Company will pay
the escrow agent for the Initial Offering a fee of $750. The Company will
pay to the Finders identified on Schedule B hereto a cash fee in the amount
of: ten percent (10%) of the Purchase Price ("Finder's Fee") and of the
actual cash proceeds received by the Company in connection with the
exercise of the Warrants issued in connection with the Initial Offering
("Warrant Exercise Compensation"). The Finder's Fee must be paid each
Closing Date with respect to the Notes issued on such date. The Warrant
Exercise Compensation must be paid to the Finders identified on Schedule B
hereto, within ten (10) days of receipt of the Warrant exercise "Purchase
Price" (as defined in the Warrant). The Finder's Fee and legal fees will be
payable out of funds held pursuant to a Funds Escrow Agreement to be
entered into by the Company, Subscriber and an Escrow Agent.
(b) The Company will also issue and deliver to the Warrant Recipients
identified on Schedule B hereto, Warrants in the amounts designated on
Schedule B hereto in connection with the Initial Offering. A form of
Warrant is annexed hereto as Exhibit D. The per share "Purchase Price" of
Common Stock as defined in the Warrant shall be equal to one hundred and
ten percent (110%) of the lowest closing bid price of the Common Stock for
the ten (10) trading days preceding but not including the Closing Date as
reported on the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ
National Market System, American Stock Exchange, or New York Stock Exchange
(whichever of the foregoing is at the time the principal trading exchange
or market for the Common Stock, the "Principal Market"), or such other
principal market or exchange where the Common Stock is listed or traded.
The Warrants designated on Schedule B hereto must be delivered to the
Warrant Recipients on the Closing Date. Failure to timely deliver the
Warrant Exercise Compensation, the Warrants or Finder's Fee shall be an
Event of Default as defined in Article III of the Note.
(c) The Finder's Fee, legal fees and escrow agent's fee will be paid
to the Finders and attorneys only when, as, and if a corresponding
subscription amount is released from escrow to the Company and out of the
escrow proceeds. All the representations, covenants, warranties,
undertakings, remedies, liquidated damages, indemnification, rights in
Section 9 hereof, and other rights but not including registration rights
made or granted to or for the benefit of the Subscriber are hereby also
made and granted to the Warrant Recipients in respect of the Warrants and
Company Shares issuable upon exercise of the Warrants.
(d) The Company on the one hand, and the Subscriber on the other hand,
agree to indemnify the other against and hold the other harmless from any
and all liabilities to any other persons claiming brokerage commissions or
finder's fees except as identified on Schedule B hereto on account of
services purported to have been rendered on behalf of the indemnifying
party in connection with this Agreement or the transactions contemplated
hereby and arising out of such party's actions. Except as set forth on
Schedule B hereto, the Company represents that there are no other parties
entitled to receive fees, commissions, or similar payments in connection
with the offering described in the Subscription Agreement.
7. Covenants of the Company. The Company covenants and agrees with the
Subscriber as follows:
(a) The Company will advise the Subscriber, promptly after it receives
notice of issuance by the Securities and Exchange Commission, any state
securities commission or any other regulatory authority of any stop order
or of any order preventing or suspending any offering of any securities of
the Company, or of the suspension of the qualification of the Common Stock
of the Company for offering or sale in any jurisdiction, or the initiation
of any proceeding for any such purpose.
(b) The Company shall promptly secure the listing of the Company
Shares, and Common Stock issuable upon the exercise of the Warrants upon
each national securities exchange, or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official
notice of issuance) and shall maintain such listing so long as any other
shares of Common Stock shall be so listed. The Company will maintain the
listing of its Common Stock on a Principal Market, and will comply in all
respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the National Association of Securities Dealers
("NASD") and such exchanges, as applicable. The Company will provide the
Subscriber copies of all notices it receives notifying the Company of the
threatened and actual delisting of the Common Stock from any Principal
Market.
(c) The Company shall notify the SEC, NASD and applicable state
authorities, in accordance with their requirements, if any, of the
transactions contemplated by this Agreement, and shall take all other
necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of
the Securities to the Subscriber and promptly provide copies thereof to
Subscriber.
(d) Until at least two (2) years after the effectiveness of the
Registration Statement on Form SB-2 or such other Registration Statement
described in Section 10.1(iv) hereof, the Company will (i) cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, (ii) comply in all respects with its reporting and filing
obligations under the Exchange Act, (iii) comply with all reporting
requirements that is applicable to an issuer with a class of Shares
registered pursuant to Section 12(g) of the Exchange Act, and (iv) comply
with all requirements related to any registration statement filed pursuant
to this Agreement. The Company will not take any action or file any
document (whether or not permitted by the Act or the Exchange Act or the
rules thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under said Acts until the
later of (y) two (2) years after the actual effective date of the
Registration Statement on Form SB-2 or such other Registration Statement
described in Section 10.1(iv) hereof, or (z) the sale by the Subscribers
and Warrant Recipients of all the Company Shares and Securities issuable by
the Company pursuant to this Agreement. Until at least two (2) years after
the Warrants have been exercised, the Company will use its commercial best
efforts to continue the listing of the Common Stock on the Bulletin Board,
NASDAQ SmallCap Market, New York Stock Exchange, American Stock Exchange,
or NASDAQ National Market System and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules
of the NASD and NASDAQ.
(e) The Company undertakes to use the proceeds of the Subscriber's
funds for the purposes set forth on Schedule 7(e) hereto. Purchase Price
may not and will not be used to pay debt or non-trade obligations
outstanding on or after the Closing Date.
(f) The Company undertakes to use its best efforts to acquire, within
three months of the Closing Date, at a commercially reasonable cost, a
standard officers and directors errors and omissions liability insurance
policy covering the transactions contemplated in this Agreement.
(g) The Company undertakes to reserve pro rata on behalf of each
holder of a Note or Warrant, from its authorized but unissued Common Stock,
at all times that Notes or Warrants remain outstanding, a number of Common
Shares equal to not less than 200% of the amount of Common Shares necessary
to allow each such holder to be able to convert all such outstanding Notes,
at the then applicable Conversion Price and one Common Share for each
Common Share issuable upon exercise of the Warrants.
8. Covenants of the Company and Subscriber Regarding Idemnification.
(a) The Company agrees to indemnify, hold harmless, reimburse and
defend Subscriber, Subscriber's officers, directors, agents, affiliates,
control persons, and principal shareholders, against any claim, cost,
expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon Subscriber or any such
person which results, arises out of or is based upon (i) any
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable notice
and/or cure periods, any breach or default in performance by the Company of
any covenant or undertaking to be performed by the Company hereunder, or
any other agreement entered into by the Company and Subscribers relating
hereto.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company and each of the Company's officers and directors at all
times against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or
imposed upon the Company or any such person which results, arises out of or
is based upon (i) any misrepresentation by Subscriber in this Agreement or
in any Exhibits or Schedules attached hereto, or other agreement delivered
pursuant hereto; or (ii) after any applicable notice and/or cure periods,
any breach or default in performance by Subscriber of any covenant or
undertaking to be performed by Subscriber hereunder, or any other agreement
entered into by the Company and Subscribers relating hereto.
(c) The procedures set forth in Section 10.6 shall apply to the
indemnifications set forth in Sections 8(a) and 8(b) above.
9.1. Conversion of Note.
(a) Upon the conversion of the Note or part thereof, the Company
shall, at its own cost and expense, take all necessary action (including
the issuance of an opinion of counsel) to assure that the Company's
transfer agent shall issue stock certificates in the name of Subscriber (or
its nominee) or such other persons as designated by Subscriber and in such
denominations to be specified at conversion representing the number of
shares of common stock issuable upon such conversion. The Company warrants
that no instructions other than these instructions have been or will be
given to the transfer agent of the Company's Common Stock and that the
Shares will be unlegended, free-trading, and freely transferable, and will
not contain a legend restricting the resale or transferability of the
Company Shares provided the Shares are being sold pursuant to an effective
registration statement covering the Shares to be sold or are otherwise
exempt from registration when sold.
(b) Subscriber will give notice of its decision to exercise its right
to convert the Note or part thereof by telecopying an executed and
completed Notice of Conversion (as defined in the Note) to the Company via
confirmed telecopier transmission. The Subscriber will not be required to
surrender the Note until the Note has been fully converted or satisfied.
Each date on which a Notice of Conversion is telecopied to the Company in
accordance with the provisions hereof shall be deemed a Conversion Date.
The Company will or cause the transfer agent to transmit the Company's
Common Stock certificates representing the Shares issuable upon conversion
of the Note to the Subscriber via express courier for receipt by such
Subscriber within three (3) business days after receipt by the Company of
the Notice of Conversion (the "Delivery Date"). A Note representing the
balance of the Note not so converted will be provided to the Subscriber, if
requested by Subscriber. To the extent that a Subscriber elects not to
surrender a Note for reissuance upon partial payment or conversion, the
Subscriber hereby indemnifies the Company against any and all loss or
damage attributable to a third-party claim in an amount in excess of the
actual amount then due under the Note.
(c) The Company understands that a delay in the delivery of the Shares
in the form required pursuant to Section 9 hereof, or the Mandatory
Redemption Amount described in Section 9.2 hereof, beyond the Delivery Date
or Mandatory Redemption Payment Date (as hereinafter defined) could result
in economic loss to the Subscriber. As compensation to the Subscriber for
such loss, the Company agrees to pay late payments to the Subscriber for
late issuance of Shares in the form required pursuant to Section 9 hereof
upon Conversion of the Note or late payment of the Mandatory Redemption
Amount, in the amount of $100 per business day after the Delivery Date or
Mandatory Redemption Payment Date, as the case may be, for each $10,000 of
Note principal amount being converted or redeemed. The Company shall pay
any payments incurred under this Section in immediately available funds
upon demand. Furthermore, in addition to any other remedies which may be
available to the Subscriber, in the event that the Company fails for any
reason to effect delivery of the Shares by the Delivery Date or make
payment by the Mandatory Redemption Payment Date, the Subscriber will be
entitled to revoke all or part of the relevant Notice of Conversion or
rescind all or part of the notice of Mandatory Redemption by delivery of a
notice to such effect to the Company whereupon the Company and the
Subscriber shall each be restored to their respective positions immediately
prior to the delivery of such notice, except that late payment charges
described above shall be payable through the date notice of revocation or
rescission is given to the Company.
(d) Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require
the payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to the Subscriber and thus
refunded to the Company.
9.2. Mandatory Redemption. In the event the Company is prohibited from
issuing Shares, or fails to timely deliver Shares on a Delivery Date, or upon
the occurrence of an Event of Default (as defined in the Note) or for any reason
other than pursuant to the limitations set forth in Section 9.3 hereof, or upon
the occurrence of an Event of Default as defined in Article III of the Note,
then at the Subscriber's election, the Company must pay to the Subscriber ten
(10) business days after request by the Subscriber or on the Delivery Date (if
requested by the Subscriber) a sum of money determined by multiplying up to the
outstanding principal amount of the Note designated by the Subscriber by 125%,
together with accrued but unpaid interest thereon ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by the Subscriber
on the same date as the Company Shares otherwise deliverable or within ten (10)
business days after request, whichever is sooner ("Mandatory Redemption Payment
Date"). Upon receipt of the Mandatory Redemption Payment, the corresponding Note
principal and interest will be deemed paid and no longer outstanding.
9.3. Maximum Conversion. The Subscriber shall not be entitled to convert on
a Conversion Date that amount of the Note and Put Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by the Subscriber and its
affiliates on a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note and Put Note with respect to which the
determination of this provision is being made on a Conversion Date, which would
result in beneficial ownership by the Subscriber and its affiliates of more than
9.99% of the outstanding shares of Common Stock of the Company on such
Conversion Date. For the purposes of the provision to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Subscriber shall not be limited to
aggregate conversions of only 9.99%. The Subscriber may void the conversion
limitation described in this Section 9.3 upon 75 days prior written notice to
the Company. The Subscriber may allocate which of the equity of the Company
deemed beneficially owned by the Subscriber shall be included in the 9.99%
amount described above and which shall be allocated to the excess above 9.99%.
9.4. Injunction - Posting of Bond. In the event a Subscriber shall elect to
convert a Note or part thereof, the Company may not refuse conversion based on
any claim that such Subscriber or any one associated or affiliated with such
Subscriber has been engaged in any violation of law, or for any other reason,
unless, an injunction from a court, on notice, restraining and or enjoining
conversion of all or part of said Note shall have been sought and obtained and
the Company posts a surety bond for the benefit of such Subscriber in the amount
of 130% of the amount of the Note, which is subject to the injunction, which
bond shall remain in effect until the completion of arbitration/litigation of
the dispute and the proceeds of which shall be payable to such Subscriber to the
extent Subscriber obtains judgment.
9.5. Buy-In. In addition to any other rights available to the Subscriber,
if the Company fails to deliver to the Subscriber such shares issuable upon
conversion of a Note by the Delivery Date and if ten (10) days after the
Delivery Date the Subscriber purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by such
Subscriber of the Common Stock which the Subscriber anticipated receiving upon
such conversion (a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion was not timely honored, together with interest thereon
at a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if the Subscriber purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of $10,000 of note principal and/or interest, the
Company shall be required to pay the Subscriber $1,000, plus interest. The
Subscriber shall provide the Company written notice indicating the amounts
payable to the Subscriber in respect of the Buy-In.
9.6 Adjustments. The Conversion Price and amount of Shares issuable upon
conversion of the Notes and Put Notes shall be adjusted consistent with
customary anti-dilution adjustments.
10.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.
(i) On one occasion, for a period commencing 46 days after the Closing
Date, but not later than three years after the Closing Date ("Request
Date"), the Company, upon a written request therefor from any record holder
or holders of more than 50% of the aggregate of the Company's Shares issued
and issuable upon Conversion of the Notes (the Common Stock issued or
issuable upon conversion or exercise of the Notes or issuable by virtue of
ownership of the Note, being, the "Registrable Securities"), shall prepare
and file with the SEC a registration statement under the Act covering the
Registrable Securities which are the subject of such request, unless such
Registrable Securities are the subject of an effective registration
statement. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of the Registrable
Securities that such registration statement is to be filed and shall
include in such registration statement Registrable Securities for which it
has received written requests within 10 days after the Company gives such
written notice. Such other requesting record holders shall be deemed to
have exercised their demand registration right under this Section 10.1(i).
As a condition precedent to the inclusion of Registrable Securities, the
holder thereof shall provide the Company with such information as the
Company reasonably requests. The obligation of the Company under this
Section 10.1(i) shall be limited to one registration statement.
(ii) If the Company at any time proposes to register any of its
securities under the Act for sale to the public, whether for its own
account or for the account of other security holders or both, except with
respect to registration statements on Forms X-0, X-0 or another form not
available for registering the Registrable Securities for sale to the
public, provided the Registrable Securities are not otherwise registered
for resale by the Subscriber or Holder pursuant to an effective
registration statement, each such time it will give at least 30 days' prior
written notice to the record holder of the Registrable Securities of its
intention so to do. Upon the written request of the holder, received by the
Company within 20 days after the giving of any such notice by the Company,
to register any of the Registrable Securities, the Company will cause such
Registrable Securities as to which registration shall have been so
requested to be included with the securities to be covered by the
registration statement proposed to be filed by the Company, all to the
extent required to permit the sale or other disposition of the Registrable
Securities so registered by the holder of such Registrable Securities (the
"Seller"). In the event that any registration pursuant to this Section
10.1(ii) shall be, in whole or in part, an underwritten public offering of
common stock of the Company, the number of shares of Registrable Securities
to be included in such an underwriting may be reduced by the managing
underwriter if and to the extent that the Company and the underwriter shall
reasonably be of the opinion that such inclusion would adversely affect the
marketing of the securities to be sold by the Company therein; provided,
however, that the Company shall notify the Seller in writing of any such
reduction. Notwithstanding the foregoing provisions, or Section 10.4
hereof, the Company may withdraw or delay or suffer a delay of any
registration statement referred to in this Section 10.1(ii) without thereby
incurring any liability to the Seller.
(iii) If, at the time any written request for registration is received
by the Company pursuant to Section 10.1(i), the Company has determined to
proceed with the actual preparation and filing of a registration statement
under the 1933 Act in connection with the proposed offer and sale for cash
of any of its securities for the Company's own account, such written
request shall be deemed to have been given pursuant to Section 10.1(ii)
rather than Section 10.1(i), and the rights of the holders of Registrable
Securities covered by such written request shall be governed by Section
10.1(ii).
(iv) The Company shall file with the Commission within 30 days of the
Closing Date (the "Filing Date"), and use its reasonable commercial efforts
to cause to be declared effective Form SB-2 registration statement (or such
other form that it is eligible to use) in order to register the Registrable
Securities for resale and distribution under the Act. The registration
statement described in this paragraph must be declared effective by the
Commission within 60 days of the Closing Date (as defined herein)
("Effective Date"). The Company will register not less than a number of
shares of Common Stock in the aforedescribed registration statement that is
equal to 200% of the Company Shares issuable at the Conversion Price that
would be in effect on the Closing Date or the date of filing of such
registration statement (employing the Conversion Price which would result
in the greater number of Shares), assuming the conversion of 100% of the
Notes. The Registrable Securities shall be reserved and set aside
exclusively for the benefit of the Subscriber, and not issued, employed or
reserved for anyone other than the Subscriber. Such registration statement
will be promptly amended or additional registration statements will be
promptly filed by the Company as necessary to register additional Company
Shares to allow the public resale of all Common Stock included in and
issuable by virtue of the Registrable Securities. No securities of the
Company other than the Registrable Securities will be included in the
registration statement described in this Section 10.1(iv) except as set
forth on Schedule 10.1 hereto, if any.
10.2. Registration Procedures. If and whenever the Company is required by
the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and
promptly provide to the holders of Registrable Securities ("Sellers")
copies of all filings and Commission letters of comment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective until the latest of: (i) twelve months after the latest
Maturity Date of a Note; or (ii) two years after the Closing Date and
comply with the provisions of the Act with respect to the disposition of
all of the Registrable Securities covered by such registration statement in
accordance with the Seller's intended method of disposition set forth in
such registration statement for such period;
(c) furnish to the Seller, and to each underwriter if any, such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement;
(d) use its best efforts to register or qualify the Seller's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller and in
the case of an underwritten public offering, the managing underwriter shall
reasonably request, provided, however, that the Company shall not for any
such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the
Company is then listed;
(f) immediately notify the Seller and each underwriter under such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event of
which the Company has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(g) make available for inspection by the Seller, any underwriter
participating in any distribution pursuant to such registration statement,
and any attorney, accountant or other agent retained by the Seller or
underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all
publicly available, non-confidential information reasonably requested by
the seller, underwriter, attorney, accountant or agent in connection with
such registration statement.
10.3. Provision of Documents.
(a) At the request of the Seller, provided a demand for registration
has been made pursuant to Section 10.1(i) or a request for registration has
been made pursuant to Section 10.1(ii), the Registrable Securities will be
included in a registration statement filed pursuant to this Section 10.
(b) In connection with each registration hereunder, the Seller will
furnish to the Company in writing such information and representation
letters with respect to itself and the proposed distribution by it as
reasonably shall be necessary in order to assure compliance with federal
and applicable state securities laws. In connection with each registration
pursuant to Section 10.1(i) or 10.1(ii) covering an underwritten public
offering, the Company and the Seller agree to enter into a written
agreement with the managing underwriter in such form and containing such
provisions as are customary in the securities business for such an
arrangement between such underwriter and companies of the Company's size
and investment stature.
10.4. Non-Registration Events. The Company and the Subscriber agree that
the Seller will suffer damages if any registration statement required under
Section 10.1(i) or 10.1(ii) above is not filed within 60 days after written
request by the Holder and not declared effective by the Commission within 150
days after such request [or the Filing Date and Effective Date, respectively, in
reference to the Registration Statement on Form SB-2 or such other form
described in Section 10.1(iv)], and maintained in the manner and within the time
periods contemplated by Section 10 hereof, and it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if (i) the
Registration Statement described in Sections 10.1(i) or 10.1(ii) is not filed
within 60 days of such written request, or is not declared effective by the
Commission on or prior to the date that is 150 days after such request, or (ii)
the registration statement on Form SB-2 or such other form described in Section
10.1(iv) is not filed on or before the Filing Date or not declared effective on
or before the sooner of the Effective Date, or within five business days of
receipt by the Company of a written or oral communication from the Commission
that the registration statement described in Section 10.1(iv) will not be
reviewed, or (iii) any registration statement described in Sections 10.1(i),
10.1(ii) or 10.1(iv) is filed and declared effective but shall thereafter cease
to be effective (without being succeeded immediately by an additional
registration statement filed and declared effective) for a period of time which
shall exceed 30 days in the aggregate per year but not more than 20 consecutive
calendar days (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) (each such event referred to in
clauses (i), (ii) and (iii) of this Section 10.4 is referred to herein as a
"Non-Registration Event"), then, for so long as such Non-Registration Event
shall continue, the Company shall pay, at the Subscriber's option, in cash or
stock at the applicable Conversion Price, as Liquidated Damages to each holder
of any Registrable Securities an amount equal to two (2%) percent per month or
part thereof during the pendency of such Non-Registration Event, of the
principal of the Notes issued in connection with the Initial Offering, whether
or not converted, whether or not converted, then owned of record by such holder
or issuable as of or subsequent to the occurrence of such Non-Registration
Event. Payments to be made pursuant to this Section 10.4 shall be due and
payable within five (5) business days after demand in immediately available
funds. In the event a Mandatory Redemption Payment is demanded from the Company
by the Holder pursuant to Section 9.2 of this Subscription Agreement, then the
Liquidated Damages described in this Section 10.4 shall no longer accrue on the
portion of the Purchase Price underlying the Mandatory Redemption Payment, from
and after the date the Holder receives the Mandatory Redemption Payment. It
shall also be deemed a Non-Registration Event if at any time a Note is
outstanding, there is less than 125% of the amount of Common Shares necessary to
allow full conversion of such Note at the then applicable Conversion Price
registered for unrestricted resale in an effective registration statement.
10.5. Expenses. All expenses incurred by the Company in complying with
Section 10, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars, and costs of insurance are called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Registrable Securities, including any fees and
disbursements of any special counsel to the Seller, are called "Selling
Expenses". The Seller shall pay the fees of its own additional counsel, if any.
The Company will pay all Registration Expenses in connection with the
registration statement under Section 10. All Selling Expenses in connection with
each registration statement under Section 10 shall be borne by the Seller and
may be apportioned among the Sellers in proportion to the number of shares sold
by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under
the Act pursuant to Section 10, the Company will indemnify and hold
harmless the Seller, each officer of the Seller, each director of the
Seller, each underwriter of such Registrable Securities thereunder and each
other person, if any, who controls such Seller or underwriter within the
meaning of the 1933 Act, against any losses, claims, damages or
liabilities, joint or several, to which the Seller, or such underwriter or
controlling person may become subject under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration
statement under which such Registrable Securities was registered under the
Act pursuant to Section 10, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Seller, each such
underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be liable to the Seller to the extent
that any such damages arise out of or are based upon an untrue statement or
omission made in any preliminary prospectus if (i) the Seller failed to
send or deliver a copy of the final prospectus delivered by the Company to
the Seller with or prior to the delivery of written confirmation of the
sale by the Seller to the person asserting the claim from which such
damages arise, (ii) the final prospectus would have corrected such untrue
statement or alleged untrue statement or such omission or alleged omission,
or (iii) to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by any such Seller, or any such controlling person in
writing specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Act pursuant to Section 10, the Seller will indemnify
and hold harmless the Company, and each person, if any, who controls the
Company within the meaning of the Act, each officer of the Company who
signs the registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within the meaning
of the Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer, director, underwriter or
controlling person may become subject under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement under which such Registrable Securities were registered under the
Act pursuant to Section 10, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action, provided,
however, that the Seller will be liable hereunder in any such case if and
only to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
information pertaining to such Seller, as such, furnished in writing to the
Company by such Seller specifically for use in such registration statement
or prospectus, and provided, further, however, that the liability of the
Seller hereunder shall be limited to the gross proceeds received by the
Seller from the sale of Registrable Securities covered by such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to
notify the indemnifying party shall not relieve it from any liability which
it may have to such indemnified party other than under this Section 10.6(c)
and shall only relieve it from any liability which it may have to such
indemnified party under this Section 10.6(c), except and only if and to the
extent the indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish,
to assume and undertake the defense thereof with counsel satisfactory to
such indemnified party, and, after notice from the indemnifying party to
such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such
indemnified party under this Section 10.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of liaison
with counsel so selected, provided, however, that, if the defendants in any
such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional
to those available to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified parties shall have the right to
select one separate counsel and to assume such legal defenses and otherwise
to participate in the defense of such action, with the reasonable expenses
and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the
event of joint liability under the Act in any case in which either (i) the
Seller, or any controlling person of the Seller, makes a claim for
indemnification pursuant to this Section 10.6 but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial
of the last right of appeal) that such indemnification may not be enforced
in such case notwithstanding the fact that this Section 10.6 provides for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of the Seller or controlling person of the Seller in
circumstances for which indemnification is provided under this Section
10.6; then, and in each such case, the Company and the Seller will
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion so
that the Seller is responsible only for the portion represented by the
percentage that the public offering price of its securities offered by the
registration statement bears to the public offering price of all securities
offered by such registration statement, provided, however, that, in any
such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (z) no person or entity guilty
of fraudulent misrepresentation (within the meaning of Section 10(f) of the
Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
10.7. Underwriter Liability. Nothing contained in this Agreement or any
document delivered herewith shall require or imply that the Subscriber is or be
an Underwriter as defined in the 1933 Act of 1934 Act, nor a "statutory
underwriter." The Subscriber shall not be required to take any action or assume
any liability or obligation which would or could impose Underwriter or
"statutory underwriter" status or liability on the Subscriber.
11. Offering Restrictions. Except (i) as disclosed in the Reports or Other
Written Information prior to the date of this Subscription Agreement, or (ii)
stock or stock options granted to employees or directors of the Company pursuant
to a plan which has been approved by the shareholders of the Company (these
exceptions hereinafter referred to as the "Excepted Issuances"), the Company
will not issue any equity, convertible debt or other securities, prior to the
expiration of (x) the later of a period equal to 180 days during which the
registration statement described in Section 10.1(iv) above has been effective,
or (y) 24 months after the Closing Date.
12. Security Interest. As a condition of Closing, the Company will deliver
to the Subscriber Common Shares of the Company owned by certain shareholders of
the Company, together with signature guaranteed stock powers. Collectively, the
foregoing stock is referred to as "Security Shares." The Security Shares will be
held by the Subscriber pursuant to a Security Agreement. Subscriber will be
granted a security interest in the Security Shares to be memorialized in a
Security Agreement. The shareholders depositing the Security Shares will execute
Forms UCC-1 to be filed at the Company's expense with such states and counties
designated by the Subscribers. The Company will also execute all such documents
reasonably necessary to memorialize and further protect the security interest
described above. The Company agrees to pay or reimburse the party who files the
Forms UCC-1.
13. Miscellaneous.
(a) Notices. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being telecopied (provided that a
copy is delivered by first class mail) to the party to receive the same at
its address set forth below or to such other address as either party shall
hereafter give to the other by notice duly made under this Section: (i) if
to the Company, to Go Online Networks Corporation, 0000 Xxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxx Xxxx, XX 00000, telecopier number: (000) 000-0000, with a
copy by telecopier only to: Xxxxxx Law Group, 000 Xxxxxxx Xxxxxx Xxxxx,
Xxxxx 000, Xxxxxxx Xxxxx, XX 00000, telecopier number: (000) 000-0000, and
(ii) if to the Subscriber, to the name, address and telecopy number set
forth on the signature page hereto, with a copy by telecopier only to
Xxxxxxx X. Xxxxxxx, Esq., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
00000, telecopier number: (000) 000-0000.
(b) Closing. The consummation of the transactions contemplated herein
shall take place at the offices of Xxxxxxx X. Xxxxxxx, Esq., 000 Xxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000, upon the satisfaction of all
conditions to Closing set forth in this Agreement. The closing date shall
be the date that subscriber funds representing the net amount due the
Company from the Purchase Price are transmitted by wire transfer to the
Company (the "Closing Date").
(c) Entire Agreement; Assignment. This Agreement represents the entire
agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. No
right or obligation of either party shall be assigned by that party without
prior notice to and the written consent of the other party.
(d) Execution. This Agreement may be executed by facsimile
transmission, and in counterparts, each of which will be deemed an
original.
(e) Law Governing this Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to principles of conflicts of laws. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial
by jury. The prevailing party shall be entitled to recover from the other
party its reasonable attorney's fees and costs. In the event that any
provision of this Agreement or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability
of any other provision of any agreement.
(f) Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof or thereof,
this being in addition to any other remedy to which any of them may be
entitled by law or equity. Subject to Section 13(e) hereof, each of the
Company and Subscriber hereby waives, and agrees not to assert in any such
suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. Nothing in this Section shall affect or limit any
right to serve process in any other manner permitted by law.
(g) Confidentiality. The Company agrees that it will not disclose
publicly or privately the identity of the Subscriber unless expressly
agreed to in writing by the Subscriber or only to the extent required by
law.
(h) Automatic Termination. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing
shall not have occurred by the tenth (10th) business day following the date
this Agreement is accepted by the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
GO ONLINE NETWORKS CORPORATION
A Delaware Corporation
0By:_________________________________
Dated: December _____, 2001
ATTEST:
By:___________________________________
--------------------------------------------------------------------------------
Purchase Price: $250,000.00
-----------
ACCEPTED: Dated as of December ____, 2001
LAURUS MASTER FUND, LTD. - Subscriber
A Cayman Island corporation
X/x Xxxxxxx Xxxxxxxxx Xxxxxxxx Xxx.
X.X. Xxx 0000 G.T.
Xxxxxxxxxx Xxxxx, Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx
Fax: 000-000-0000
By:______________________________
AGREED AND ACKNOWLEDGED
AS TO SECTION 11
----------------------
XXXXXX X. XXXXXXXX
SCHEDULE B TO SUBSCRIPTION AGREEMENT
-------------------------------------------------------------------- ----------------------------------------------------------
FUND MANAGER OFFERING - CASH FUND MANAGER'S FEES
-------------------------------------------------------------------- ----------------------------------------------------------
LAURUS CAPITAL MANAGEMENT, L.L.C. 10% Fund Manager's Fees and Warrant Exercise
000 Xxxx 00xx Xxxxxx, Xxxxx 0000 Compensation payable in connection with investment and
Xxx Xxxx, Xxx Xxxx 00000 warrant exercise by Laurus Master Fund, Ltd. for which
Fax: 000-000-0000 Laurus Capital Management, L.L.C. is the Fund Manager.
-------------------------------------------------------------------- ----------------------------------------------------------
WARRANTS
-------------------------------------------------------------------- ----------------------------------------------------------
WARRANT RECIPIENT WARRANTS IN CONNECTION WITH OFFERING
-------------------------------------------------------------------- ----------------------------------------------------------
LAURUS MASTER FUND, LTD. Warrants issuable in connection with investment by
C/o Onshore Corporate Services Ltd. Laurus Master Fund, Ltd.
X.X. Xxx 0000 G.T.
Xxxxxxxxxx Xxxxx, Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx
Fax: 000-000-0000
-------------------------------------------------------------------- ----------------------------------------------------------
TOTAL 600,000 Warrants
-------------------------------------------------------------------- ----------------------------------------------------------
